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USDA Loan Refinancing

If you've received a United States Department of Agriculture (USDA) loan in the past, you know how beneficial this program can be for low to medium income homebuyers. By providing 100% financing, construction loans, and not requiring private mortgage insurance, the USDA is able to open the housing market up to buyers who would not otherwise qualify.

Even better news for current Section 502 Direct and Guaranteed borrowers looking to lower their rate, the USDA offers a favorable streamline refinancing option known as the USDA Rural Refinance Pilot program.

In recent years, the popular USDA Streamline Refinance Program has been expanded to include 15 additional states, giving thousands more people access to an appraisal-less, unlimited-LTV refinance; and, according to the USDA, approximately half a million homeowners are now eligible for the USDA's streamlined refinance program.

USDA Streamline Refinance Eligibility

The USDA Streamline Refinance is a pilot program for U.S. homeowners. First launched in 2012, the streamline program was designed to reflect pre-existing, successful streamline programs like the popular VA Streamline Refinance or IRRRL.

If you've received a USDA mortgage and feel that your rate is higher than the current rate, refinancing your loan is an option. There are a few requirements, however, to meet before you begin the refinancing process.

  • The mortgage to be refinanced must already be a 502 USDA Loan (Guaranteed or Direct).
  • The mortgage to be refinanced should be current (not delinquent).
  • The refinance is to result in a lowering of the borrower's monthly principal and interest payments.
  • No cash may be taken out on mortgages refinanced using the USDA loan refinance process.

Other than the aforementioned requirements, borrowers must use the refinance on their primary residence and the borrower must have made 12 consecutive, on-time, payments directly before the refinance.

USDA Streamline Process

The USDA mortgage refinance is generally a streamlined process. Since you have already qualified and borrowed a 502 Direct or Guaranteed USDA Loan, some documentation and information would be redundant. The streamlined process will shorten the time necessary to close on your loan and will require you to provide less paperwork and fill out fewer forms.

USDA loans also require no property inspection, which will save you, on average, $400-$500. Speaking of money, closing costs can be rolled into the loan, which means that you can refinance your loan without having cash up front.

Up to 102% Financing

If you are refinancing your mortgage in order to improve your home, keep in mind that USDA program requirements do allow for financing up to 102% of the appraised value of the home. That means that you’re able to borrow more than the house is worth for improvements, and the improvements can be completed after your new loan closes. This program can be hugely helpful to those who are attempting to sell their home but still need to make repairs or improvements in order to market it to its fullest potential, for example, or if you simply need to make some changes around the house.

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